The Basics of Tax Resolution
Chad Dickinson • November 12, 2024
What is Tax Resolution?
Tax resolution is the structured process of negotiating with the IRS to manage and resolve tax debt issues like unpaid taxes, penalties, or disputes. Through various IRS programs, taxpayers can potentially reduce the amount owed or arrange manageable payment terms. For a comprehensive guide on these solutions, visit the IRS's official Tax Debt Assistance page.
We recommend always using a professional when communicating with the IRS, but this article shows you the process.
Importance of Addressing Tax Debt Early
- Avoid Escalating Penalties and Interest – Delaying payment leads to accumulating interest and penalties, significantly increasing the total debt.
- Prevent IRS Collection Actions – Addressing tax debt promptly helps avoid aggressive IRS actions, such as wage garnishments, bank levies, and property liens.
- Protect Your Credit – Unresolved tax debt can lead to liens, which may negatively impact your credit score and hinder future financial opportunities.
- Qualify for Resolution Programs – Early action allows you to explore options like installment agreements, penalty abatement, or an Offer in Compromise, potentially reducing the total debt.
- Reduce Financial Stress – Resolving tax debt sooner offers peace of mind, reducing financial uncertainty and preventing stress from prolonged tax issues.
Types of IRS Transcripts and Their Uses
The IRS provides several types of transcripts to assist taxpayers in managing their tax account and reviewing their tax history. This information is used when forming a resolution strategy:
- Account Transcript – Displays essential account data, including balance owed, payments, and adjustments after filing. This is helpful for understanding the status of a tax account and is available for the current and nine prior tax years.
- Record of Account – Combines both the Account and Tax Return Transcripts, giving a comprehensive view of tax and payment history, along with any adjustments. It’s accessible for the current and three prior tax years.
- Tax Return Transcript – Shows most line items from the originally filed tax return, useful for income verification on loan applications. It doesn’t reflect post-filing adjustments and is available for the current and three prior tax years.
- Wage & Income Transcript – Summarizes income reported to the IRS, such as Forms W-2, 1099, and 1098. Ideal for reconstructing income if records are missing, and available for the current and nine prior tax years.
These transcripts are essential tools for taxpayers needing to verify income, assess their IRS account status, or provide documentation for financial aid, loans, and other applications. Each type can be requested through the IRS’s Get Transcript service.
Overview of the Six-Year Lookback Rule for Filing
This overview provides the essentials of the Six-Year Lookback Rule and its significance in managing tax compliance.
1. What is the Six-Year Lookback Rule?
- The IRS generally requires taxpayers to file returns for only the last six years, even if more years are missing.
2. Purpose of the Rule
- This rule aims to streamline the filing process, allowing the IRS to collect necessary filings while avoiding backlogs of very old returns.
3. Exceptions to the Rule
- In certain cases, the IRS may request older returns if:
- There are outstanding audits.
- Significant unreported income from previous years is discovered.
- State tax returns may also have different lookback requirements.
4. Benefits of Compliance
- Filing the last six years’ returns can bring a taxpayer into "good standing" with the IRS, making it easier to qualify for resolution programs like installment agreements or offers in compromise.
5. Key Takeaway
- For taxpayers with missing returns, filing the last six years helps ensure compliance, potentially avoiding further penalties and enforcement actions.
Understanding the Collection Statute Expiration Date (CSED)
1. What is CSED?
- CSED stands for Collection Statute Expiration Date, the date by which the IRS must legally stop collection efforts on a tax debt, typically 10 years from the assessment date.
2. How CSED is Calculated
- The 10-year collection period starts from the assessment date of the tax debt, generally when the tax return is filed, or the IRS issues a tax assessment.
3. Why CSED Matters
- Knowing the CSED helps taxpayers plan, as the IRS cannot pursue collection actions (such as liens or levies) once this date has passed.
4. Events That Can Extend CSED (Tolling Events)
- Certain actions can "pause" or extend the CSED, including:
- Filing for bankruptcy.
- Submitting an Offer in Compromise.
- Requesting a Collection Due Process Hearing.
- Leaving the U.S. for an extended period.
5. Importance of Tracking CSED
- Tracking the CSED ensures taxpayers know when their liability may expire, allowing them to strategically decide on repayment or settlement plans.
Common Tax Resolution Options
1. Installment Agreement
- Allows taxpayers to pay their tax debt in monthly installments.
- Useful for those who can’t pay the full amount upfront but can make manageable monthly payments.
2. Offer in Compromise (OIC)
- A settlement option where the IRS agrees to accept less than the full amount owed.
- Taxpayers must demonstrate limited ability to pay to qualify.
3. Currently Not Collectible (CNC) Status
- Temporarily halts IRS collection efforts for taxpayers facing severe financial hardship.
- Debt remains, but active collections (like liens and levies) are paused until financial circumstances improve.
4. Partial Payment Installment Agreement (PPIA)
- A modified installment plan that allows lower monthly payments than a standard installment agreement.
- Generally requires a review of the taxpayer’s financial situation and may be reassessed periodically.
5. Streamlined Installment Agreement (SIA)
- Offers a quick approval process without extensive financial review, making it easier for eligible taxpayers.
- Allows manageable monthly payments for up to 72 months, reducing the stress of immediate full payment.
Each resolution option provides a pathway to manage tax debt based on the taxpayer's specific financial situation, allowing them to resolve or reduce their tax obligations with the IRS.
Steps to Begin the Tax Resolution Process
1. Gather All Tax Documents
- Collect recent tax returns, IRS notices, and income statements. Also, request IRS transcripts to understand the full scope of the debt and account activity.
2. Assess Financial Situation
- Evaluate current income, expenses, assets, and liabilities to understand financial standing. This assessment is crucial to determine eligibility for various resolution options.
3. Identify Available Resolution Options
- Based on your financial review, decide which option (Installment Agreement, Offer in Compromise, etc.) may be most suitable for managing the tax debt.
4. Complete IRS Forms
- Fill out necessary forms specific to the resolution option, such as Form 9465 for Installment Agreements or Form 433-A for financial disclosures in an Offer in Compromise.
5. Submit the Proposal to the IRS
- Send your completed forms and documents to the IRS and wait for their response. Timely and accurate submissions increase the chances of successful negotiation.
6. Respond to IRS Communications Promptly
- Stay responsive to IRS notices or requests for additional information, as delays could result in collection actions or denial of the proposal.
This process can be complicated and you should consult with a professional. Arch Tax has submitted thousands of successful resolutions with the IRS and we are available to give you a
free consultation. You can also call us at
(844) 556-3073.
The passage of the One Big Beautiful Bill Act (OBBBA) has reshaped the tax landscape in a big way. Many tax cuts that were set to expire at the end of 2025 are now permanent, and several new planning opportunities have opened up. With the year quickly coming to a close, now is the ideal time to review your tax situation and see what steps you can take to reduce your 2025 tax bill. Before making any moves, work with your professional advisors to estimate what you’ll owe this year and identify which strategies best fit your situation. The earlier you begin, the more flexibility you’ll have to put these plans in motion before December 31. 1. Establish Your Tax Baseline Start by having your tax advisor prepare a pro forma 2025 tax return. This gives you a clear picture of where you stand—your projected income, deductions, and how different decisions may affect your final tax bill. If you're working with a financial team, request a year-to-date tax summary of your investment accounts. With this snapshot, you’ll have a solid foundation for determining which strategies are worth implementing before year-end. 2. Evaluate These Tax-Smart Strategies Harvest Tax Losses Markets have generally performed well this year, so you may be sitting on more taxable gains than expected. Tax-loss harvesting can help offset these gains by selling investments at a loss before year-end. If you want to repurchase the same investment, be sure to avoid the wash sale rule , which disallows a loss if you buy a substantially identical security within 30 days before or after the sale. One workaround is to double up —buy more now, wait 30+ days, then sell the original losing position. Important date: November 28, 2025 (the day after Thanksgiving) is the final day to sell at a loss and have it count for the 2025 tax year. Loss harvesting isn’t just a year-end task. Even in strong markets, individual positions may decline, creating opportunities throughout the year. Maximize Charitable Contribution Deductions If you plan to make charitable gifts, timing matters. Transfers of stock or other assets can take time to complete, so check with your financial institutions to ensure the donation is finalized before December 31. Because OBBBA imposes new charitable deduction limitations starting in 2026 , it may be advantageous to front-load charitable giving in 2025 . Beginning in 2026: Itemized charitable deductions are reduced by 0.5% of AGI Total itemized deductions for taxpayers in the 37% bracket are capped at 35% of AGI For high-income taxpayers, that may make a 2025 donation more valuable than the same gift in 2026. If you’re undecided about which charity to support, consider a donor-advised fund (DAF) . You receive the deduction immediately, but you can distribute the funds to charities later. Optimize Estimated Tax Payments Many high-income taxpayers must make quarterly estimated tax payments to avoid underpayment penalties. You can meet the requirements using the “lesser of” safe harbor : 110% of your prior year’s tax liability, or 90% of your current year’s projected tax liability If you expect your 2025 taxes to be significantly higher than in 2024, it may be strategic to base your estimates on 2024’s lower liability and invest the difference in short-term, principal-protected fixed-income investments. This lets you earn some return on money you’ll eventually pay in taxes. 3. Optimize Retirement, Compensation, and Benefits Max Out Retirement Contributions For 2025, the contribution limits are: IRAs: $7,000 (or $8,000 if age 50+) 401(k)/403(b): $23,500 $31,000 for those age 50+ $34,750 for those turning age 60–63 in 2025 If you’re eligible, consider whether a Roth conversion makes sense—especially if you expect higher income tax rates in the future and can pay the conversion tax using funds outside the IRA. Take Required Minimum Distributions (RMDs) Anyone age 73 or older generally must take RMDs by December 31 each year. If charity is part of your plan, a qualified charitable distribution (QCD) from your IRA can satisfy part or all of your RMD. This strategy, however, may not always be the most tax-efficient depending on your broader financial picture. For inherited IRAs where the owner died after 2019, new regulations beginning in 2025 require many beneficiaries to take annual distributions over a 10-year period , with the remaining balance distributed in year 10. The rules are complex, so work closely with your tax advisor. Consider Deferring Compensation If your employer offers a deferred compensation plan, election deadlines typically fall before December 31, 2025 for 2026 income deferrals. Deferring compensation delays income taxation until you receive the funds, potentially allowing you to take advantage of future lower tax rates. However, deferred compensation is subject to employer credit risk, so weigh the pros and cons carefully. Review Stock Options Executives with stock options may want to consider exercising some in 2025. Strong candidates for exercise include options that are: Deep in the money On high-dividend stocks Close to expiration Your advisory team can prepare an options breakeven analysis to help you decide. 4. Make Tax-Efficient Gifts to Family Use Lifetime Exclusion While It Lasts The current gift and estate tax exclusion is: $13.99 million per individual $27.98 million per married couple These increase to $15 million ($30 million for couples) in 2026 under OBBBA. If you anticipate a taxable estate and have unused exemption, making large gifts now may help lock in additional tax-free transfer capacity. Take Advantage of the Annual Gift Exclusion For 2025, you may give: $19,000 per recipient (individual) $38,000 per recipient (married couple electing to split gifts) This exclusion is use-it-or-lose-it —unused amounts cannot be carried over to future years. Many families use this strategy to fund 529 education plans , where earnings grow tax-free when used for qualified education expenses. 5. Work With Tax Professionals to Finalize Your Plan Year-end tax planning is full of opportunities—but also details, deadlines, and complex rules. Arch Tax can help determine which actions make the most sense for your personal and financial goals. Starting now gives you time to implement strategies that may strengthen your financial position and reduce your overall tax liability. Schedule your free consultation today
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It’s a question that can send a shiver down your spine, a classic nail-biter that pops up right around tax season: “How much do I really owe the IRS?” Let’s be honest, navigating the world of taxes can feel like trying to solve a Rubik’s Cube in the dark. Whether you’ve hit a few financial bumps in the road or simply lost track of your tax returns, figuring out your standing with the Internal Revenue Service (IRS) is the first crucial step toward getting your financial house in order. This guide will walk you through the different ways to uncover that magic number, from sleuthing online to making a good old-fashioned phone call. And once you know what you’re up against, we’ll even explore some expert-backed strategies for settling your score with Uncle Sam. Cracking the Code: How to Figure Out What You Owe Finding out your tax liability is easier than you might think. The IRS has several methods available to help you get the information you need. Here’s a breakdown of your options: Your Online IRS Account The quickest and most convenient way to get to the bottom of your tax situation is by using the IRS’s online tools. The “View Your Tax Account” feature on the IRS website is your one-stop shop for all things tax-related. To get started, you’ll need to create an account and verify your identity. You’ll need some personal information on hand, like your Social Security number, date of birth, and the filing status and mailing address from your most recent tax return. Once you’re in, you’ll have access to a wealth of information, including: Your payment history Any outstanding balances you owe Information about your payment plans Digital copies of certain IRS notices This is the fastest way to see what you owe and even make payments online. Just be mindful of any potential bank fees associated with online payments. A Little Help From a Friend: Calling the IRS If you prefer a more personal touch, you can always give the IRS a call. The general inquiry line is 1-800-829-1040. Before you dial, make sure you have your personal information and a copy of your most recent tax return handy. An IRS representative can help you with a balance inquiry, explain any outstanding balances, and walk you through your payment options. While it might take a bit of patience to get through, speaking with a real person can be incredibly helpful, especially if you have questions about your tax records or payment plans. The Paper Trail: Reaching Out by Mail For those who appreciate the tangible nature of snail mail, you can also request your tax information by mail. You’ll need to send a written request to the IRS, and it’s a good idea to use the address listed on the most recent notice you’ve received. If you don’t have a recent notice, you can find the correct address on the IRS website. Keep in mind that this is the slowest method, and with taxes, time is of the essence. Unpaid taxes can quickly accumulate penalties and interest, so it’s best to use a faster method if possible. You’ve Got the Number, Now What? Strategies for Settling Your Tax Bill Knowing how much you owe is half the battle. Now it’s time to come up with a plan to pay it off. Here are some effective strategies for settling your tax bill: File on Time, Every Time: The easiest way to avoid getting into tax trouble is to file your taxes on time, every year. This will help you avoid late filing penalties. Explore Payment Options: If you can’t pay your entire tax bill at once, don’t panic. The IRS offers several payment options, including installment agreements and offers in compromise. You can apply for these online or with the help of an IRS representative. Use Your Refund to Your Advantage: If you’re expecting a tax refund, you can have the IRS apply it directly to your outstanding balance. Look into Penalty Waivers: If you have a good compliance history, you may be eligible for a first-time penalty waiver. It’s worth looking into! Don’t Be Afraid to Ask for Help: If you’re feeling overwhelmed, consider seeking advice from a tax professional. They can help you navigate the complexities of the tax system and find the best solution for your unique situation. Frequently Asked Questions How long does the IRS have to collect unpaid taxes? The IRS generally has 10 years to collect unpaid taxes from the date they were assessed. This is known as the Collection Statute Expiration Date (CSED). However, certain actions, like entering into an installment agreement or filing for bankruptcy, can extend this period. Should I take out a loan to pay my taxes? This is a tricky one. While a loan can provide immediate relief and help you avoid IRS penalties and interest, it’s not without its own risks. You’ll need to be sure you can afford the loan repayments, and you’ll want to compare the interest rate on the loan to the penalties and interest charged by the IRS. It’s always a good idea to consult with a financial advisor before making this decision. How can I check my IRS balance myself? As we’ve covered, you have three main options: online through the “View Your Tax Account” feature on the IRS website, by phone at 1-800-829-1040, or by mail. For the fastest and most comprehensive information, the online portal is your best bet. Dealing with the IRS can be stressful, but it doesn’t have to be a nightmare. By taking a proactive approach and using the resources available to you, you can take control of your tax situation and get back on the path to financial freedom. You don’t have to face the IRS alone. Contact Arch Tax today and we’ll help you understand your options and take the next step s forward .
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Every year, as tax season begins, millions of Americans diligently gather their documents, determined to file accurately and on time. Yet many unwittingly fall into procedural traps—set not by malice, but by the sheer complexity of the U.S. tax code. From the perspective of a tax resolution company who’s seen countless taxpayers blindsided by unexpected notices and penalties, it’s clear the IRS has a playbook. Automated systems, targeted audits, and strict procedural rules can catch even the most honest individuals off guard. This isn’t about scare tactics—it’s about awareness. Understanding where these traps lie is the first step toward navigating tax season with confidence. Below are five of the most common IRS traps, along with practical steps to help you steer clear. Trap #1: The Automated Refund Delay Trap What It Is: The IRS withholds refunds from millions of taxpayers for “additional review,” a process triggered automatically by sophisticated error-detection algorithms. While most refunds are issued within 21 days, a flagged return can be delayed for months with little communication. Why It’s a Trap: Even minor mismatches between your reported income and what the IRS receives from employers (W-2s) or clients (1099s) can freeze your refund. Common triggers include small data entry errors, incorrect Social Security numbers, or deductions that look statistically unusual for your income level. How to Avoid It: Cross-check every figure on your return before filing. E-file early—late-season filers face heavier scrutiny—and always use direct deposit. A paper check is over 16 times more likely to be lost or stolen, which can prolong the wait even further. Trap #2: The High-Stakes Credit Crackdown (EITC & CTC) What It Is: The IRS aggressively audits returns claiming the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) . These credits are vital for working families, yet have some of the highest error rates in the system. Why It’s a Trap: Because of those error rates, the IRS effectively operates on a “prove you’re right” basis. EITC claims are audited more than four times as often as typical individual returns—and certain demographics face disproportionate scrutiny. How to Avoid It: Be audit-ready from day one. Keep: Proof of income (pay stubs, 1099s, bank statements) Proof of residency for dependents (school, medical, or official records) Don’t file until all documentation is organized. If audited, clear proof can quickly resolve the issue in your favor. Trap #3: The Gig Economy Reporting Trap (1099-K) What It Is: Third-party payment apps like PayPal, Venmo, and Cash App now report income for goods and services through Form 1099-K. Though the threshold has changed repeatedly, the reporting system remains firmly in place. Why It’s a Trap: Many gig workers and side-hustlers assume small amounts of income “don’t count.” The IRS’s automated matching software disagrees—discrepancies between what platforms report and what you file are automatically flagged. How to Avoid It: Report all income, even if you don’t receive a 1099-K. Track deductible business expenses carefully—mileage, phone, supplies, and other legitimate costs—to reduce taxable income. Always keep receipts and logs to substantiate your claims. Trap #4: The “Voluntary” Disclosure Illusion What It Is: Sometimes the IRS sends friendly-sounding letters encouraging taxpayers to “voluntarily” correct past filings or unpaid balances. Why It’s a Trap: The IRS generally has 10 years from the date a tax is assessed to collect it—known as the Collection Statute Expiration Date (CSED) . When you respond to these letters, file old returns, or make payments, you can accidentally restart or extend that 10-year clock—giving the IRS more time to pursue you with added penalties and interest. How to Avoid It: Never reply to an old-debt notice without professional advice. A tax resolution expert can determine your CSED and guide you on whether to respond strategically—or not at all. Trap #5: The Resolution Runaround (Offer in Compromise) What It Is: The IRS Fresh Start Program , especially the Offer in Compromise (OIC) , is promoted as a chance to settle tax debt for less than you owe. Why It’s a Trap: OIC qualification rules are deliberately strict, and only about 20–40% of applications are approved. Many taxpayers apply without understanding the IRS’s complex financial formulas or fail to provide every required document. Rejection not only wastes time and money but also hands the IRS your complete financial profile. How to Avoid It: Before applying, get a realistic assessment of your eligibility. Tools like Arch Tax’s Resolution Assistant can show which programs you actually qualify for and save you from unnecessary exposure. Conclusion: Navigating the Maze with Confidence The IRS doesn’t have to deceive taxpayers—the system itself is complicated enough to trap the unprepared. Awareness, documentation, and expert guidance are your strongest defenses. At Arch Tax , we help taxpayers navigate the complexities before they turn into costly problems. If you’re facing an IRS issue—or just want peace of mind this tax season—see which programs and protections fit your situation. Click here to schedule a free consultation
